Published: March 11, 2010
Congoleum Corporation Reports Year End Results
Congoleum Corporation (PINKSHEETS: CGMCQ)
today reported its financial results for the fourth quarter ended December
31, 2009. Sales for the three months ended December 31, 2009 were $28.1
million, compared with sales of $31.7 million reported in the fourth
quarter of 2008, a decrease of 11.3%. During the fourth quarter of 2009,
Congoleum recorded a charge of $5.2 million based on a revised estimate of
the timing and cost to complete its reorganization in 2010. The net loss
for the fourth quarter of 2009 after this charge was $8.2 million, compared
with a net loss of $6.4 million in the fourth quarter of 2008. The net loss
per share was $0.99 in the fourth quarter of 2009 compared with a net loss
of $0.77 per share in the fourth quarter of 2008.
Sales for the year ended December 31, 2009 were $134.9 million, compared
with sales of $172.6 million in 2008. The net loss for the year ended
December 31, 2009 was $15.2 million, or $1.83 per share, versus a net loss
of $14.6 million, or $1.77 per share, in 2008. The net loss for 2008
included an $11.5 million charge taken during the third quarter of 2008 to
increase reserves for estimated legal and related expenses in connection
with the reorganization proceedings.
Roger S. Marcus, Chairman of the Board, commented, "While our end markets
remained weak in the fourth quarter of 2009, several additional factors
contributed to our loss. First, we took a charge of $5.2 million for what
we expect the remaining costs will be to complete our reorganization in
2010. Second, distributor inventory reductions cost us about $1.2 million
in lost margin and contribution to fixed manufacturing overhead. Finally,
the fourth quarter was burdened with an additional $1.5 million in pension
expense due to depressed asset values at the end of 2008. Without these
negative factors, we would have essentially broken even for the quarter
despite the poor economy."
"2009 was an extraordinarily challenging year due to the economic and
credit climate. Demand for our products fell sharply in all our markets --
new construction, remodel, and especially manufactured housing. We made
the difficult but necessary major adjustments to our workforce and spending
in the first quarter of 2009 to bring our cost structure into better
alignment with market conditions. While our loss for the year was
significant, it was greatly mitigated by the steps we took. Generating
cash was a focus throughout the year, and we ended 2009 with $16.1 million
in unrestricted funds, up $1 million from the year before and providing us
necessary financial flexibility heading into 2010. The dedication of our
employees through this difficult period has been exceptional."
"Our business plan for 2010 was conservatively developed on the assumption
that economic conditions will not improve this year and that our success
will depend on bringing out new products. Toward that end, we introduced a
major new product line in the fourth quarter of 2009, another in the first
quarter of 2010, and have a third that will be introduced during the second
quarter of 2010. We believe these introductions will help generate
incremental sales in 2010 despite a lackluster economy. While keeping our
expenses under tight rein, we have and will continue to bring exciting and
innovative new products to the marketplace. We also anticipate some relief
on the increased pension expense we experienced in 2009, as the recovery in
asset values should reduce the 2010 expense level by $1.7 million versus
2009. In addition, we do not expect further inventory reductions to hurt
our 2010 production efficiencies as happened in 2009. Even without any
recovery in the economy, I expect we will see significantly improved
operating results in 2010 versus 2009."
Mr. Marcus concluded by saying, "As recently reported, our reorganization
efforts are moving ahead quickly, and the court has presently scheduled a
confirmation hearing to commence May 25, 2010. Having settled our long
running litigation with substantially all of the insurance carriers who
have been the major opponents to previous efforts, we expect a much
smoother road ahead to confirmation. I am optimistic that we will see our
plan confirmed in the second quarter of 2010 and that we can emerge
reasonably promptly thereafter. Putting the bankruptcy behind us in 2010
will be a major step forward."
Congoleum Corporation is a leading manufacturer of resilient flooring,
serving both residential and commercial markets. Its sheet, tile and plank
products are available in a wide variety of designs and colors, and are
used in remodeling, manufactured housing, new construction and commercial
applications. The Congoleum brand name is recognized and trusted by
consumers as representing a company that has been supplying attractive and
durable flooring products for over a century.
The above news release contains certain forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act of 1995, that
involve risks, uncertainties and assumptions. These statements can be
identified by the use of the words such as "anticipate," "believe,"
"estimate," "expect," "intend," "plan," "project" and other words of
similar meaning. In particular, these include statements relating to
intentions, beliefs or current expectations concerning, among other things,
future performance, results of operations, the outcome of contingencies
such as bankruptcy and other legal proceedings, and financial conditions.
These statements do not relate strictly to historical or current facts.
These forward-looking statements are based on Congoleum's expectations, as
of the date of this release, of future events, and Congoleum undertakes no
obligation to update any of these forward-looking statements.
Although Congoleum believes that these expectations are based on reasonable
assumptions, within the bounds of its knowledge of its business and
operations, there can be no assurance that actual results will not differ
materially from its expectations. Readers are cautioned not to place undue
reliance on any forward-looking statements. Any or all of these statements
may turn out to be incorrect. By their nature, forward-looking statements
involve risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future. Any forward-looking
statements made in this press release speak only as of the date of such
statement. It is not possible to predict or identify all factors that could
potentially cause actual results to differ materially from expected and
historical results. Factors that could cause actual results to differ from
expectations include: (i) the future cost and timing of estimated asbestos
liabilities and payments, (ii) the availability of insurance coverage and
reimbursement from insurance companies that underwrote the applicable
insurance policies for the Company for asbestos-related claims, (iii) the
costs relating to the execution and implementation of any plan of
reorganization pursued by Congoleum, (iv) timely reaching agreement with
other creditors, or classes of creditors, that exist or may emerge, (v)
satisfaction of the conditions and obligations under Congoleum's
outstanding debt instruments, (vi) the response from time to time of
Congoleum's and its controlling shareholder's, American Biltrite Inc.'s,
lenders, customers, suppliers and other constituencies to the ongoing
process arising from Congoleum's strategy to settle its asbestos liability,
(vii) Congoleum's ability to maintain debtor-in-possession financing
sufficient to provide it with funding that may be needed during the
pendency of its Chapter 11 case and to obtain exit financing sufficient to
provide it with funding that may be needed for its operations after
emerging from the bankruptcy process, in each case, on reasonable terms,
(viii) timely obtaining sufficient creditor and court approval of any
reorganization plan pursued by Congoleum (including the results of any
relevant appeals), (ix) compliance with the United States Bankruptcy Code,
including Section 524(g), (x) costs of, developments in, and the outcome of
insurance coverage litigation pending in New Jersey state court involving
Congoleum and certain insurers, (xi) the possible adoption of another
party's plan of reorganization which may prove to be unfeasible, (xii)
increases in raw material and energy prices or disruption in supply, (xiii)
increased competitive activity from companies in the flooring industry,
some of which have greater resources and broader distribution channels than
Congoleum, (xiv) increases in the costs of environmental compliance and
remediation or the exhaustion of insurance coverage for such expenses, (xv)
unfavorable developments in the national economy or in the housing industry
in general, including developments arising from the war in Iraq and
Afghanistan and from the tightening of credit availability, (xvi) shipment
delays, depletion of inventory and increased production costs resulting
from unforeseen disruptions of operations at any of Congoleum's facilities
or distributors, (xvii) product warranty costs, (xviii) changes in
distributors of Congoleum's products, and (xix) Congoleum's interests may
not be the same as its controlling shareholder, American Biltrite Inc. In
any event, if Congoleum is not successful in obtaining sufficient creditor
and court approval of a plan of reorganization, such failure would have a
material adverse effect upon its business, results of operations and
financial condition. In the event that the modified plan is confirmed and
becomes effective holders of existing common shares of Congoleum will
receive nothing on account of their interests and their shares will be
cancelled. Actual results could differ significantly as a result of these
and other factors discussed in Congoleum's annual report on Form 10-K for
the year ended December 31, 2008 and subsequent filings made by Congoleum
with the Securities and Exchange Commission.
CONGOLEUM CORPORATION
RESULTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Net Sales $ 28,102 $ 31,696 $ 134,917 $ 172,644
Cost of Sales 23,546 30,166 114,236 142,032
Selling, General &
Administrative Expenses 7,236 9,259 30,143 35,397
Asbestos Related Reorganization
Charges 5,244 -- 5,244 11,491
--------- --------- --------- ---------
Loss from Operations (7,924) (7,729) (14,706) (16,276)
Interest (Expense) Income,(net) (30) (144) (227) 857
Other Expense (146) (179) (96) (970)
--------- --------- --------- ---------
Net Loss before Income Taxes (8,100) (8,052) (15,029) (16,389)
Provision/(Benefit) for Income
Taxes 90 (1,665) 140 (1,768)
--------- --------- --------- ---------
Net Loss $ (8,190) $ (6,387) $ (15,169) $ (14,621)
========= ========= ========= =========
Net Loss Per Share, Basic &
Diluted $ (0.99) $ (0.77) $ (1.83) $ (1.77)
========= ========= ========= =========
Weighted Average Number of
Common Shares Outstanding -
Basic & Diluted 8,272 8,272 8,272 8,272
========= ========= ========= =========
ADDITIONAL FINANCIAL INFORMATION:
Capital Expenditures $ 387 $ 1,845 $ 2,314 $ 4,591
Depreciation and Amortization $ 2,342 $ 2,457 $ 9,584 $ 10,238
CONDENSED BALANCE SHEET
(In thousands, except per share amounts)
(Unaudited)
December 31, December 31,
----------- -----------
2009 2008
----------- -----------
ASSETS:
Cash and cash equivalents $ 16,065 $ 15,077
Restricted cash 31,580 29,680
Accounts & notes receivable, net 11,699 13,789
Inventory 28,883 35,814
Other current assets 3,868 3,922
----------- -----------
Total current assets 92,095 98,282
Property, plant & equipment (net) 49,250 56,520
Other assets (net) 22,331 17,065
----------- -----------
Total assets $ 163,676 $ 171,867
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable, accrued expenses & deferred
income taxes $ 85,110 $ 80,924
Revolving credit loan - secured debt 14,180 13,994
Liabilities subject to compromise - current 4,997 4,997
----------- -----------
Total current liabilities 104,287 99,915
Liabilities subject to compromise 149,671 161,503
Long term debt -- --
Other liabilities -- --
----------- -----------
Total liabilities 253,958 261,418
Stockholders' equity (deficit) (90,282) (89,551)
----------- -----------
Total liabilities & stockholders' equity $ 163,676 $ 171,867
=========== ===========
ADDITIONAL FINANCIAL INFORMATION:
Working Capital $ (12,192) $ (1,633)
Current Ratio 0.9 1.0
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